Solving Your HAMP Loan Modification Predicament

by Sonia in Plainfield, IL, by Eric, and by Shelba in Orting, WA

Ask Kate about HAMP loan modification before divorce and other predicaments: Sonia wonders what she should know before modifying her mortgage since she's in the middle of a divorce. Eric asks who he can contact after his lender raised his permanent payment following the trial HAMP period. Shelba wants to know if she can still modify her mortgage should her husband lose his job after their FHA streamline refinance.

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Divorce and HAMP Loan Modification Guidelines

By Sonia in Plainfield, IL

Dear Kate,

My husband and I are currently in the middle of divorce proceedings.

He is willing to move out and sign a Quit Claim Deed. The home is 3 months behind on the mortgage.

Would I be able to save my home and file for a HAMP on my own? Are there any guidelines that HAMP has that are specific to modification during divorce?

Super good questions! To answer you, I am going to quote Making Home Affordable HAMP guidelines specific to divorce.

Question: If one of the borrowers on the loan is non-responsive (will not supply income documentation and will not sign a Home Affordable Modification Agreement), can the HAMP modification proceed with the remaining borrower who is residing in the household, as long as the HAMP modification does not have to be recorded?

Answer: Unless a borrower or co-borrower is deceased or a borrower and a co-borrower are divorced, all parties who signed the original loan documents or their duly authorized representative(s) must execute the HAMP documents. If a borrower and a co-borrower are divorced and the property has been transferred to one spouse in the divorce decree, the spouse who no longer has an interest in the property is not required to execute the HAMP documents. Servicers may evaluate requests on a case-by-case basis when the borrower is unable to sign due to circumstances such as mental incapacity, military deployment, etc.

But don't let guidelines keep you from applying for HAMP just because your divorce isn't final. I urge you to call your loan servicer to discuss your situation, especially since your mortgage payments are 3 months behind.

You can find more help regarding HAMP and divorce issues at these Ask Kate letters:

I agree! Why bother seeing if you can make monthly payments during the trial period when the loan servicer is going to squeeze a higher mortgage payment out of you in the final modification!

It's a shady practice and reeks of manipulation.

Make a stink! It will take elbow grease on your part and the process will probably be frustrating. It might even require writing Washington DC. But I for one would love to see you become the national poster child for Fairness in Mortgage Modification.

There is actually a Making Home Affordable modification program (HAMP) specifically for loans insured or guaranteed by the Federal Housing Administration (FHA).

A big concern is that your FHA streamline refinance is going to be originated after HAMP's cut-off date for obtaining a mortgage - on or before January 1, 2009.

I would verify if this cut-off date is going to impact your eligibility for a HAMP modification by calling FHA's National Servicing Center at 877-622-8525 or a HUD-approved housing counselor at 888-995-HOPE (4673).

Best wishes for getting an affordable payment,

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Comments for Solving Your HAMP Loan Modification Predicament.

Mortgage Modification During Legal Separation and Before Divorceby: Paul D. from Agawam, MA

Hi Kate,

I am having a difficult time dealing with my bank (BOA) for a loan mod.

I am behind 4 payments, however my wife and I are separated, during that time she signed the quit claim deed signing her name off the deed (I realize her name will remain on the loan).

I applied for the mod through my own income as my ex has an income but pays her own bills with it. If I just add the extra income it will show that I do not qualify for any type of mod because of the additional income. The bank told me I needed to record the new deed which I did, and they said that I needed to request a legal separation document, again, what I did.

NOW they are telling me I need to supply the separation decree with I do not have. I explained to them the waiting time for these can be up to a year to be completed in court.

Please help,Paul D

Hi Paul, Kate here...

Fannie Mae and Freddie Mac state that a divorce decree, court filed separation agreement, or recorded quit claim deed should be sufficient to determine which parties must sign after a divorce or legal separation, assuming the other borrower (in your case, your wife) has vacated the premises.

Try giving the loan servicer written proof of your soon-to-be ex-spouse's new residence. I'd try to document the length of time she has been out of the house as well.

Assume you are sending this into a disjointed work environment because, most likely, you are. So, with this letter, include (again) the quit-claim deed, the separation and write a cover letter explaining your intent.

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